In Southern California, SBA administrator speaks of ‘sustainable and stable landing’

A Latina who calls Southern California home, she’s seen a surge in minority-owned business starts during the post-COVID 19 recovery. And she sees part of her mission as making sure those new companies are able to survive as the Federal Reserve raises interest rates to drive inflation back to the 2% mark.

“Black and brown founders are leading the charge in terms of start-up rates,” she told the Business Times during an interview at DieselTech, a firm that specializes in repairing controls on heavy truck engines.

“We need to make sure this is a sustainable and stable landing of the economy,” she said, adding that the recently enacted Inflation Reduction Act will bring down costs in health care and energy for small firms.

Her swing through the Los Angeles area on Sept. 15 neatly bracketed Black Business Month in September and Hispanic Heritage Month in October.

At the SBA, Guzman is recognized as an experienced hand who served as deputy chief of staff in the Obama administration before her appointment by President Joe Biden to lead the agency. She scaled up the organization to handle some $1.2 trillion in small business financing and now is focused on making sure as many as possible of the 7.8 million new businesses formed since 2021 make it through the next phase of the economic cycle.

Small businesses already have been through a lot in terms of the pandemic, and she acknowledged that inflation poses its own set of challenges.

“Some businesses are holding back on multiple price increases because they are not sure it is worth the cost of marketing” and possible lost customers, she said.

With the Federal Reserve poised to raise interest rates again at its September meeting, many economists are warning that raising interest rates high enough to bring down inflation is likely to trigger a recession. But Guzman said small businesses have shown remarkable resilience; they’ve been able to “pivot and adapt” to major changes in the way the economy works.

One example is DieselTronics, where Guzman had an animated conversation with owner Laura Marquez, who, along with her husband, took over the business from her father several years ago. New California rules will phase out the hulking diesel engines whose repairs and upgrades have been the bread and butter of the family businesses.

But electric trucks will also need maintenance and repairs, and although it will require transforming the business, being in California will give the company a competitive advantage as some of the clean energy provisions of the Inflation Reduction Act come into effect nationwide.

SBA can help provide “the capital to buy new equipment and the training” to both deliver services and analyze market opportunities, Guzman said.

In addition to industries like transportation that are going through their biggest transformations in a century, tight labor markets have affected virtually every workplace.

The SBA’s Small Business Development Centers have been working with employers to develop internships and apprenticeship. Rather than experience turnover, many employers are looking to “train up” entry level workers to reduce turnover and gain operating leverage, Guzman said.

The Biden administration’s recent win on legislation that will advance clean energy and give Medicare the power to negotiate discounts on a limited range of drugs will reduce energy prices and slightly reduce the deficit. But with the Federal Reserve plotting a series of rate hikes, there is likely to be more pain ahead for both consumers and small business owner operators.

Still, Guzman thinks the recent wave of new business starts is a durable trend. “Businesses are learning to operate month by month,” she said.

“They just want to find a way to succeed, and they are incessantly hopeful,” she said.